THE BUSINESSWEEK 50 RANKINGS + 25

54

Southern

Southern Co. annoys advocates of electricity deregulation. It resisted the 1990s fashion of breaking itself up and buying its power on the open market. Instead, the rates of the giant Atlanta-based holding company are regulated the old-fashioned way by the states in its service territory: Georgia, Alabama, and parts of the Florida Panhandle and Mississippi. Today, under CEO David Ratcliffe, it’s more profitable—and more popular with its customers, according to independent surveys—than utilities that jumped on the dereg bandwagon. Rates are below the national average. Dependence on coal as a fuel is a potential Achilles’ heel, but the company says it’s working on clean coal technologies and new nuclear units for the coming decade. Analysts say Southern has less profit-growth potential than some rivals because it doesn’t sell a lot of juice on the high-priced and volatile spot market outside its service territory. True, but Southern prefers its lower-risk strategy of signing customers to contracts averaging 13 years.

Overall Grade

A-

Market Data

SO

Market Value
(2/28/2007)

$26.7 Billion

Profitability*

12.6%

B

Sales Growth Rate**

9.8%

B-

12-Month Sales

$14.4 Billion

12-Month Net Income

$1.6 Billion

Total Return Past 12 Months

10.0%

Past 36 Months

35.1%

Economic SectorUtilities
IndustryElectric Utilities
The overall sector letter grade reflects how the weighted average of the return on income, or return on equity, and sales growth grades compare with others in the same sector. For the overall grade as well as the ROE/ROI and sales growth grades, an "A" places a company in the top 7% of its sector and an "A-" in the top 14% of the sector. The actual ranking was done using the underlying numerical measures. Grades are for information only.
* For nonfinancial companies, three-year average pretax operating profit before interest and special items as a percentage of average invested capital. For financial companies, pretax profits as a percentage of average shareholder's equity.
*Three-year average annual sales growth based on the most recently reported 36 months, calculated using the least-squares method.

David Ratcliffe

David Ratcliffe, 58

CEO since 2004


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Data as of 2/28/07 provided by Standard & Poor's Compustat